For decades, the transatlantic corridor has been one of the world’s most powerful economic relationships. EU-U.S. trade in goods and services has doubled over the last decade, surpassing €1.6 trillion in 2024. In 2022, firms on both sides invested €5.3 trillion in each other’s markets. But that deep interdependence is now under strain.

In July, Brussels and Washington struck a new deal, capping U.S. tariffs on EU goods at 15%, with some variations by industry. The headlines have been full of the “winners and losers” of the deal; automakers like VW, Mercedes and BMW, among the EU’s top exporters, will be largely affected. But startups face the same turbulence with far fewer buffers.

For founders, the tariff ceiling is less about percentages and more about unpredictability. Startups depend on cross-border capital, predictable supply chains, and global clients to grow. When rules shift overnight, the impact is immediate: investors retreat, costs become impossible to forecast, and founders scramble to restructure. This piece explores how European startups are navigating the fallout and the strategies they’re using to stay resilient in an increasingly unstable trade landscape.

When tariffs squeeze VCs, startups feel it first

The most immediate shock of the EU-U.S. trade rift isn’t on the factory floor; it’s in the flow of capital. Venture investors are already recalibrating as tariffs ripple across borders. “If you’re looking at a portfolio of industries that rely substantially on cross-border trade or transactions, like hardware, clean tech—even biotech to a degree—you’re in a world of hurt right now,” said Tom Drummond, managing partner at the San Francisco-based VC firm Heavybit, in an interview with Wired earlier this year.

The uncertainty is eroding the “borderless” model that venture once thrived on. As Pitchbook‘s Leah Hodgson put it, “For decades, VC has flourished in an increasingly borderless world, but another week of tariff wars is prompting a major reassessment.” That pullback shows up in the numbers: in Q1 of 2025, only 46.9% of total European deal value included US capital, nearly four percentage points less than in the previous quarter. Analysts call it “home bias”: when political risk rises, investors retreat to their domestic markets.

For founders, the impact is tangible. Vitor Monteiro, co-founder and CTO of Portuguese AI innovation studio Unflow, called it “an economic gut punch for European startups that could stall critical innovation and throw growth-stage companies into uncertainty.”

In ecosystems with limited local capital, a pullback from U.S. investors could sharply slow growth, leaving startups more dependent on European funds and on EU efforts to close the gap.

Forecasting costs in a world of tariffs

For European startups, the numbers on paper don’t tell the full story. Yes, the EU’s economists say the direct macroeconomic impact is expected to be modest, only shaving a fraction off GDP. But what rattles founders isn’t the headline percentage; it’s the uncertainty.

The war in Ukraine, ongoing political instability, and the return of Trump’s tariff threats have turned the transatlantic trade corridor into a moving target. Even European Council President António Costa admitted the war in Ukraine was a factor in the EU’s accepting its much-criticized trade deal with the U.S.

That volatility trickles down. Sectors like automotive, pharmaceuticals, and machinery—among Europe’s biggest exporters—face the highest risk. SMEs make up 99% of EU businesses, and many of Europe’s startups are embedded in these value chains, whether it’s mobility tech for automotive, medtech tools tied to pharma, or precision engineering for machinery. When tariff volatility disrupts their clients’ demand, this leaves startups unable to forecast with confidence.

As Shinichiro (SHIN) Nakamura, President of one to ONE Holdings, explains, “Tariffs will affect startups differently depending on whether they sell goods or services. For goods companies, the tariffs will substantially affect their growth strategies, as selling into the U.S. market will now be much more expensive and harder to make profitable.” He added that for early-stage firms, that may lead them to “find their beachhead either within Europe or further east.” Meanwhile, service-provider startups, such as software platforms or consultancies, “are likely to continue seeking out business with the U.S.”

Asparuh Koev, CEO of Transmetrics, an AI-enabled logistics platform based out of Bulgaria, says the guessing game is the hardest part. “Reduced tariff clarity, even if temporary, makes it significantly harder to forecast costs and optimize routes. We hope that clearer agreements, such as tariff reductions and mutual recognition of standards, will restore confidence and allow Bulgaria’s tech and logistics sectors to stay competitive.”

Why startups are anchoring in the EU

Startups arguably have more agility than corporates, but that flexibility comes at a price. Structuring your operations for resilience demands strategic foresight, compliance work, and costly legal setups.

One founder is making that bet now. Yaacov Martin, CEO of The Jifiti Group, explains how they’ve already shifted European contracting to their Sweden-based EU entity, home to their Electronic Money Institute license, to safeguard continuity. “The evolving EU-U.S. trade environment has prompted us to focus on using our local EU entity, based in Sweden, for our European contractual needs. If the trade rift continues to develop, we’re already fully set up to ensure continuity, compliance and confidence for our partners and customers on both sides of the Atlantic,” he said.

Brussels is also pushing through structural reforms to make Europe a stronger home base for startups. In May, the Commission launched its EU Startup and Scaleup Strategy, including plans for a 28th European regime to simplify rules across borders and cut the cost of failure in areas like insolvency, labor, and tax. Part of the package is a Scaleup Europe Fund aimed at filling the funding gap for deep-tech companies, plus a voluntary Innovation Investment Pact to bring more big institutional investors into the startup fold.

Stephane Sejourne, EU executive vice-president for prosperity and industrial strategy, shared in a statement: “We cut red tape, we facilitate their access to financing, we improve their ability to do business across our Single Market.”

For founders, these initiatives make local EU entities more attractive by lowering compliance friction and improving access to growth capital, helping startups weather external shocks like transatlantic tariffs.